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# Which country would treasurer want to invest company funds

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The treasurer of a major U.S. firm has \$12 million to invest for 3 months. The interest rate in the U.S. is 0.42 percent per month. The interest rate in Great Britain is 0.52 percent per month. The spot exchange rate is 0.70, and the three-month forward rate is 0.71. Ignoring transaction costs, in which country would the treasurer want to invest the company's funds? Why?

a) U.S.; earn an additional \$47,211.16.
b) U.S.; earn an additional \$135,325.24
c) U.K.; earn an additional \$9,418.02
d) U.K.; earn an additional \$38,522.47
e) U.K.; earn an additional \$121,510.67.

#### Solution Preview

Suppose the Treasurer invest in US, than

Interest Earned for 3 months = 12,000,000*0.42%*3 = 151,200

Now Suppose the treasurer invest in UK, then

Conversion of \$ into GBP = ...

#### Solution Summary

The solution provides a detailed step-by-step analysis and decides in which country would the treasurer want to invest the company's funds.

\$2.19